Editorial: California's budget bleeding ends for now

2013-05-17 15:54:47

The reaction by Gov. Jerry Brown and leaders of the Legislature to the May budget revision certainly was encouraging. The state's short-term deficit problems are under control. There's even a small surplus, and, fortunately, Brown and the state's top Democrats are insisting on keeping the lid on spending.

But the good budget numbers obscure deep problems. The state's unfunded obligations for public-employee pensions and retiree health care are sky-high, and other bricks in that "wall of debt" the governor used to refer to, remain as immovable as ever.

Controller John Chiang notes that a sign of fiscal health – for individuals or governments – is the amount of cash on hand. Despite Gov. Brown's admirable insistence on establishing a rainy-day fund, California government continues to live on borrowed cash.

The biggest problem, perhaps, is that the state's tax and regulatory climate is more punishing for private businesses than in most other states. California cannot build a growing economy, and keep the tax revenue flowing to fund its large government, unless it lures more investment.

Ramped up cap-and-trade regulations will only harm California's efforts to rebuild the manufacturing economy. Meanwhile, the Legislature continues to advance bills that would put the kibosh on fracking – the oil-development technology that promises to flood the state's coffers with revenue as it offers high-paying jobs.

Granted, Gov. Brown and legislative leaders are taking a go-slow approach toward additional major tax hikes. Brown has taken important steps to help the oil industry in California, so it's by no means a certainty that these bad trends will become bad law. Still, instead of bashing Texas for its efforts to lure business, Brown and Co. need to reassure California investors that this state isn't hostile to them.

We never hear any acknowledgement from the state's political class about ways to stretch existing dollars by improving efficiencies, enhancing competition and reining in outsized compensation costs. That's because doing so would mean taking on California's muscular public-sector unions, another obstacle to long-term economic growth.

So the short-term news is good, and we applaud the governor for taking a modest approach toward new spending and taxing. But, at some point, state leaders must address a "wall of debt" and other long-term problems that remain as perilous as ever.